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Getting Divorced During Bankruptcy – What Happens?

Getting Divorced During Bankruptcy – What Happens?

Getting divorced during a bankruptcy presents major ethical considerations for your Georgia bankruptcy attorney when a husband and wife file a case together (See Georgia Model Rules of Professional Conduct).  In an individual case, your Georgia bankruptcy attorney may simply need to file amendment reflecting the loss income of the spouse and a new expense list.  In either situation, the bankruptcy attorney will need to sit down with the client and review the entire case.

Divorce in Joint Bankruptcy Cases

In a joint case, your attorney has an ethical duty of loyalty to both the husband and the wife.  How can your bankruptcy attorney be one hundred percent loyal to you and your spouse at the same time if a conflict arises?  Its impossible.  As a result, most attorneys will withdraw from representing either party.  Any attorney that fails to withdraw in conflict situations may face sanctions from the Bankruptcy Court.

Example of Conflict in a Joint Bankruptcy Case

An example of a conflict that would force a bankruptcy attorney to withdraw from the case is a reaffirmation agreement.  Lets say you have a husband and wife that are joint signers on a note for a 2009 Monster Large Truck.  The husband loves the Monster Truck and does not want to give it up at any cost.  In contrast, the wife is ready to get divorced and move on with a fresh start in life.  In this scenario, it is clearly not in the best interest of the wife to reaffirm this debt.

Lets say she reaffirmed this debt.  A few years down the road, ex-husband is remarried and has two children by his new wife in his new life.  Out of the blue, he loses his job.  He can no longer afford the Monster Truck.  Sadly, the car creditor repossesses the Monster Truck.  Then, the creditor follows Georgia law and auctions it off.  Unfortunately, the Monster Truck sells for less than half of what is owed to the creditor.  Guess who is going to get sued for the deficiency?  Drum roll please.  The answer is the ex-wife.  She thought she moved on with a new start in life.  She had heard about his new wife and children.  She thought it was all behind her until the Floyd County Sheriff show up at her house one fine summer afternoon in front of all the neighbors and served the lawsuit from the creditor.

In divorce situations, it is always best for debtors to have separate attorneys.

Since hiring a new attorney to review your entire case and proceed with continuing the case is expensive, most joint debtors will beg their attorney to keep representing them both to save money.  In this situation, the attorney will have the clients sign an agreement stating that they understand the potential for conflict and that the attorney will withdraw from representing either debtor in the event a conflict arises.

In cases where there is no secured debt or when every type of secured collateral is being surrendered to the creditors, the chance for conflict is low.

Other Posts

1.  Bankruptcy and Divorce Orders

2.  Should I File Bankruptcy Before or After the Divorce?

3.  How Much Does it Cost to File Bankruptcy?

4.  What is Chapter 13?

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